Cartus Corporation & Anor v Sidell & Anor

On 16^th July 2014 I handed down my judgment on the Claimants’ application for the continuation of a without notice injunction granted in their favour by Supperstone J. on 20^th March 2014 and for various other orders. I refused to continue the injunction for the reasons which I then gave. I invited submissions as to the orders which should follow my judgment. I received written submissions from Mr Caldecott QC and Ms Addy on behalf of the Claimants and from Mr Cohen on behalf of the Defendants. Mr Cohen served some further written submissions in reply. Both sides made oral submissions on 16^th July. I reserved my decision.

Parts of the order that needed to be made were uncontroversial. It was agreed by consent that the Claimants would have leave to amend their Particulars of Claim to redact the copy of the Defendants’ document “The Ugly Truth” which was attached to the Particulars. Although not by consent, it was also agreed that in consequence of my judgment, the Claimants’ application for a continuation of the injunction should be dismissed and Supperstone J’s injunction should be discharged. Likewise, it was agreed that in consequence of my judgment, there should be no order on the Claimants’ applications: (a) to amend the Particulars of Claim; (b) for a determination of the actual meanings of “The Ugly Truth” or a proposed covering letter; (c) for pleas of Truth and Qualified Privilege in the Defence to be struck out; (d) for final judgment in the Claimants’ favour. It was also agreed that there should be no order on the Defendants’ application to amend their defence.

There were two controversial aspects: what should happen to the action; and costs.

The Defendants argued that the action should be struck out. In my judgment I had found that the Claimants had not been able to show that the Defendants intended to publish “The Ugly Truth” or the covering letter nor, with reasonable certainty, any other words defamatory of the Claimants. Since no words had ever been published these quia timet proceedings would necessarily fail and should be struck out. The Claimants submit the action should not be struck out but should be stayed. They emphasise that the power to grant a stay is a wide and flexible one – see Rofa Sport Management AG v DHL International (UK) Ltd [1989] 1 WLR 902. Paragraph 19 of the proposed Amended Defence did indicate a possible intention of the Defendants to publish more limited allegations about the Claimants. The prospect of the need for further litigation on the subject was not, therefore, a fanciful one. If that arose, it would be more convenient to use this action as the vehicle rather than to start a new one. It was no longer the case (as it once was) that a claim form could only be amended to plead a cause of action which existed when the original claim was issued. If the action was struck out there was a risk that the Claimants would in a later action be met with a plea of res judicata. The Defendants had never issued an application to strike out the claim.

This is not a dispute with much substance. The absence of an application to strike out the claim is a matter of form rather than substance. I am extremely doubtful as to whether Mr Caldecott’s concerns about a potential plea of res judicata to a new action have any justification since any future action would depend on some future threat to publish that did not exist at the time I gave my judgment. Nonetheless, I am persuaded that a stay rather than a strike out would better reflect the position as to the changing attitude of the Defendants towards publishing “The Ugly Truth” or the allegations contained in it. Paragraph 19 of the proposed Amended Defence showed that the Defendants are still contemplating some more limited publication. If, when publication takes place, or publication of words which can be identified with reasonable certainty is threatened, the Claimants decide that they wish to take further action, then I agree that there is some convenience in this action being used as the appropriate vehicle rather than a second action. Mr Cohen was concerned that the Defendants should not continue to have this matter hanging over them. However, the stay will remain in place until further order of the Court. A further judicial decision will therefore be necessary before the action is revived. Mr Cohen was concerned that these subtleties may be less easily understood by his lay clients, but they will have extremely competent lawyers to explain the consequences to them. I will stay the action until further order with liberty to apply. I will, however, add a qualification. It is not sensible for a stayed action to continue indefinitely. If no application is made to remove the stay for 2 years then, it seems to me, it should be consigned to history and, at that stage, be struck out.

Mr Caldecott proposed that I should consider costs in 5 stages:

The Claimants had been granted relief by Supperstone J. The Defendants’ criticisms of the way that had been achieved had been largely rejected by me and I had considered that the Judge would nonetheless have granted an injunction, albeit in somewhat narrower terms. The Defendants had subsequently changed their position as to their intentions about publishing “The Ugly Truth” and the covering letter, but that change could not influence whether the Claimants should be granted a costs order in their favour for the proceedings before Supperstone J. Mr Caldecott proposed that the Claimants should have a proportion of their costs of the without notice injunction – only a proportion because of the criticisms which had been accepted.

The Defendants had not complied with a consent order made by Burnett J. on 28^th March 2014 to serve their evidence in opposition to the continuation of the injunction by 10^th April 2014. They issued an application for an extension of time and/or relief from sanctions on 5^th May 2014. The Claimants opposed this, but an extension was granted. Other procedural directions were made. Mr Caldecott suggested that a fair reflection of this stage of the proceedings would be to make no order as to costs for it.

In the lead up to the hearing before me, Mr Caldecott noted nothing of substance occurred until 5^th May 2014. Then, as well as applying to extend time, the Defendants served two witness statements. The original defence was served on 28^th May. That was not signed by the 2^nd Defendant. It said that the Defendants did not intend to publish “The Ugly Truth” but that statement had to be read with Mr Sidell’s witness statement which had said,

“I will say that I did not have any intention to circulate the Ugly Truth in the exact form it was provided to Cartus. I would have redacted or omitted the personal details and kept the document focused entirely on Acadia. I achieve nothing by embarrassing Destival or others.”

Mr Caldecott submitted that, read together, this witness statement and the original defence suggested Mr Sidell still intended to publish the allegations in “The Ugly Truth”, less only the embarrassing personal details. The witness statement of Mr Williamson agreed that some of the information in “The Ugly Truth” “is undoubtedly embarrassing but it is nevertheless true”. He said nothing about intending to delete those parts from any publication.

Mr Caldecott submitted that the original defence did not come close to justifying wholesale fraud by the Claimants leading to hundreds of millions of pounds of losses to Cartus customers going back to 2002. The Claimants’ task had been unnecessarily and improperly made more complicated because the original Defence incorporated by reference the witness statements of Mr Sidell and Mr Williamson. While the original Defence said that the Defendants did not intend to publish “The Ugly Truth”, it said nothing about the covering letter or any intention to publish similar words with the same meanings. The Defence also denied that the “The Ugly Truth” and the covering letter had the meanings which the Particulars of Claim attributed to them even though those were taken almost verbatim from those two documents. As things then stood, the Claimants were justified in applying for determination of meanings and to strike out the pleas of Truth and Qualified Privilege.

Mr Caldecott submitted as well that the Defendants’ skeleton argument was not served with the proposed Amended Defence and the brief allusion to that document in the skeleton did not signify the proposed changes in the Defendants’ position. Mr Sidell had signed the statement of truth on the proposed Amended Defence on 20^th June 2014, yet the Claimants had not been shown it until the day before the hearing before me.

Even the proposed Amended Defence did not refer to the Defendants’ intentions regarding the covering letter. As I had said in my judgment, that was only made clear during the course of Mr Cohen’s submissions. It was only in the course of the hearing as well that Mr Cohen made clear that the Defendants did not allege that Mr Destival had been acting on instructions from any superior.

In summary, Mr Caldecott submitted that the conduct of the Defendants meant that the Claimants should recover a proportion of the costs leading up to the hearing and of the hearing itself. While the starting point for the exercise of a costs discretion was that the successful party should get its costs - see CPR r.44.2(2)(a), in deciding whether some other order should be made the Court had to have regard to the conduct of the parties – see r.44.2(4)(a).

The Application to amend the Particulars of Claim involved relatively little expenditure (and may be none on the part of the Defendants). Mr Caldecott accepted that the Claimants should bear their own costs of this and seemed minded to accept that they must bear the Defendants’ costs of this as well (if there were any).

Mr Cohen noted that I had accepted some of his criticisms of the Claimants’ behaviour in obtaining an injunction without notice from Supperstone J. I had said that an injunction would still have been granted, but that did not prevent the Court marking the Claimants’ faults in terms of costs.

It was correct that the original defence had not referred to the intentions of the Defendants regarding the covering letter, but that was treated by both parties as intimately connected with “The Ugly Truth”. Thus the covering letter was originally described as the covering message to the Defendants’ distribution of “The Ugly Truth” to the clients of Cartus. The injunction granted by Supperstone J. referred to “The Ugly Truth” and did not separately deal with the covering letter. The Claim Form was for an injunction to restrain the words complained of in a document entitled “The Ugly Truth” or any similar words defamatory of the Claimants. Again it did not separately identify the covering letter as a separate document.

Mr Cohen submitted that throughout the litigation the Claimants, large and wealthy corporations, had behaved oppressively to two individuals. Had there been a continuing concern after the original Defence was filed on 28^th May as to whether the Defendants still intended to publish the covering letter as opposed to “The Ugly Truth” the Claimants’ solicitor could have spoken to the Defendants’ solicitor. They would have been told that that was not the Defendants’ intention.

Mr Cohen argued that there was no change material to the issue of costs in the proposed Amended Defence (as opposed to the original Defence). Both documents denied an intention to publish “The Ugly Truth”. The proposed Amended Defence outlined imputations which a future publication might make, but I had held in the judgment that the absence of clarity as to the words which the Defendants intended to publish meant that this statement of positive intention gave the Claimants no cause of action nor entitled them to a continued injunction.

Mr Sidell’s witness statement had said what he would leave out (personal and embarrassing details) but also, importantly, that he would focus on the flaws of Acadia.

While I had not found it necessary to decide whether the Defendants had an arguable defence of Truth for the purpose of deciding the substantive issues on the application, if I thought the position was sufficiently clear, I could make a broad determination for the purpose of dealing with costs. Mr Cohen argued, as he had on the substantive application, that it would be absurd if Cartus could slough off responsibility for the acts of their employees. They would be liable for them for the purposes of the laws of tort and agency and, for the purpose of the law of defamation, their employees’ acts could be equated with the acts or defaults of the corporation.

A claimant who applied without notice for an injunction had to take the risk that, on the return date, a good defence would be apparent. If that was the case the claimant could not fairly recover the costs of the without notice application.

With the exceptions that I deal with below, I consider that a fair overall conclusion is that the Claimants should recover 50% of all their costs to be subject to detailed assessment if not agreed on the standard basis.

I will assume for these purposes that the stay remains in place. If that is so, then the Defendants have, ultimately, been the successful party. I must (at least in part) recognise that fact, as Mr Caldecott acknowledged.

However, the Defendants were successful, in my view, only because of the greater clarity of their future intentions which were expressed in the proposed Amended Defence and at the hearing.

I do not accept that the outcome would have been the same if the original defence had stood alone. I acknowledge that in that document the 1^st Defendant at least (the original defence was not signed by the 2^nd Defendant) said he did not intend to publish “The Ugly Truth”. However, by itself that did not go far enough. I agree with Mr Caldecott that the Claimants were then entitled to read that in conjunction with Mr Sidell’s first witness statement. He then spoke of intending to delete the personal embarrassing details, but those details featured hardly at all in the Claimants’ complaints of defamation. It is true that he also said he intended to focus entirely on Acadia, but that was far too vague as to represent any evidence of a significant departure from the intention to publish words with the allegations which had led Supperstone J. to grant his injunction.

I consider that it is also significant that the original Defence in paragraph 18 said nothing about the covering letter. The Claim Form related to “The Ugly Truth” “or similar words”. The injunction granted by Supperstone J. prohibited publication of “The Ugly Truth” or other words with the meanings listed. However, the Particulars of Claim dealt separately with “The Ugly Truth” and the covering letter. The original Defence likewise responded separately to the pleadings in relation to “The Ugly Truth” on the one hand and the covering letter on the other. In that context, the Claimants were entitled to consider the reference to “The Ugly Truth” alone in paragraph 18 as significant and to treat likewise the omission to refer to the covering letter in the proposed Amended Defence. Mr Cohen is right that the Claimants’ solicitor could have spoken to the Defendants’ solicitor about this, but it was for the Defendants to volunteer information about their future intentions (if they wished). The Claimants’ failure to initiate further discussion about them is not conduct which, in my judgment, which should influence my costs order.

I reject the argument of Mr Cohen that the Claimants were behaving oppressively by the applications which they issued before me. Until the Defendants’ intentions as to publication were clarified by the proposed Amended Defence and what Mr Cohen said in the course of the hearing, those were legitimate procedural steps for them to take.

In my judgment I found that Supperstone J would still have granted the without notice injunction despite any of the criticisms of the Claimants’ behaviour which had any substance. He reserved any question of costs to the Judge dealing with the application on the return date. Mr Cohen is right to the extent that if continuing relief had been refused because of circumstances which existed at the time of the without notice order, the Claimants could not have expected to recover their costs of the without notice application. However, I refused relief because of developments subsequent to the hearing before Supperstone J. In particular, I accepted that the contents of the proposed Amended Defence paragraph 19 and what Mr Cohen said at the hearing meant that the Claimants could no longer show a threat to publish “The Ugly Truth” or the covering letter and what was contemplated was (a) much narrower and (b) not sufficiently precise to be the subject of a quia timet injunction. I agree with Mr Caldecott that this subsequent change in the Defendants’ position cannot disentitle his clients to their costs of the application before Supperstone J.

There are, as Mr Caldecott recognised, other reasons why the Claimants cannot recover all of those costs. In my previous judgment I did say (as Mr Caldecott had acknowledged) that Ms Addy had given the Judge the wrong test for when it is permissible to apply to restrain freedom of expression without notice to the defendant. Mr Caldecott also acknowledged that the injunction was granted in wider terms than it should have been. I also considered that it would have been better if the injunction (in the circumstances of the case) had contained an express territorial limitation.

In connection with a decision on costs, the Court should be careful about being drawn into a decision on the merits of the case which did not have to be resolved for the purpose of the substantive decision. I accept, of course, that this is permissible if the merits on one side or the other are clear cut. I do not regard this as such a case. In particular, I do not consider that what the parties called “the agency question” is amenable to such a decision. In the first place, I accept Mr Caldecott’s submission that the issue in libel is not whether as a matter of the law of tort or agency Cartus would be responsible for the acts of its employees such as Mr Destival, but what was conveyed to an ordinary reader by the words used or to be used. It was arguable in this case that the words used conveyed that there was corruption in Cartus, not just because they were vicariously responsible for the defaults of the specific employees who were identified. Even if the words were looked at through the lens of agency law, I had some considerable difficulty with the case which the Defendants wished to advance. It was their case that they had conspired with Mr Destival to deceive the ultimate customers of Cartus into thinking that ACRL (the Defendants’ company) were offering particularly low rates when in fact those were to be re-inflated by the addition of extras. It is not immediately obvious as to how the Defendants could have thought this was within the scope of Mr Destival’s ostensible authority on the part of Cartus, particularly when they knew that Mr Destival and Ms Santos (their employee) had an intimate relationship. I stress that I am not making any findings as to these matters. I am simply explaining why the agency issue is not one whose merits are so obvious that I should take them into account in making my decision on costs.

I said above that there were two qualifications to my decision that the Defendants should bear 50% of the Claimants’ costs.

The first is that I agree that there should be no order as to the costs of the applications heard before Sir David Eady on 8^th May. The Defendants had not served their evidence in the time prescribed by the consent order of Burnett J. Whether a sanction was attached to that order or not, they needed to have an extension of time approved by the Court. The Claimants ought not to have opposed the application. The Court made other directions. I agree with Mr Caldecott that the fairest way to treat this is as a ‘no score draw’ and make no order as to costs.

The second qualification is the Claimants’ application to amend the Particulars of Claim by redacting the filed copy of “The Ugly Truth”. They should bear their own costs of doing this and, if the Defendants have incurred any costs in consequence, pay those.